Biden Administration Intensifies Offensive Against Ocean Shipping Industry

The Biden Administration issued a press release and fact sheet on Feb. 28, 2022, titled "Lowering Prices and Leveling the Playing Field in Ocean Shipping." The release builds on a series of ongoing efforts (see previous Holland & Knight alert, "DOJ to Collusive Price Gougers Exploiting Supply Disruptions: We Will Prosecute You," Feb. 18, 2022) to tackle supply chain disruptions by leveraging the Shipping Act and antitrust laws. The main takeaways are:

• The U.S. Department of Justice (DOJ) is expanding its cooperation with the Federal Maritime Commission (FMC). Building on the DOJ-FMC 2021 memorandum of understanding (MOU), the DOJ will "provide the FMC with the support of attorneys and economists from the Antitrust Division for enforcement of violations of the Shipping Act and related laws." Likewise, the FMC will share shipping industry experience with the DOJ for Sherman Act and Clayton Act enforcement actions.

The FMC has already taken steps to audit ocean carriers, based on complaints received from cargo owners. In addition, the DOJ recently announced an initiative to investigate and prosecute antitrust activities in other parts of the supply chain. In its most recent initiative, the Administration is again focusing on ocean shipping, and highlighted high shipping costs and practices perceived to contribute to congestion and cost increases.

• Shipping Act Reform. The Biden Administration called on Congress to "provide additional tools ... to address problems in the ocean shipping industry" and expressed encouragement with current legislative efforts. The Administration is referring to bills under consideration in the U.S. House of Representatives and Senate — the Ocean Shipping Reform Act of 2021 (OSRA 2021) (H.R. 4996) and the Ocean Shipping Reform Act of 2022 (OSRA 2022) (S. 3580) — proposing an array of different changes to the Shipping Act intending to target congestion, practices and charges. OSRA 2021 passed the House in December 2021 with bipartisan support. The Senate companion bill, OSRA 2022, is under consideration in that chamber. Despite the common purposes, the bills have significant differences that must be worked out.
• Changes to Antitrust Immunity? The Administration also called on Congress to "address the immunity of alliance agreements from antitrust scrutiny under current law." According to the White House Fact Sheet, "Congress steadily deregulated the industry — expanding the antitrust immunity while weakening ocean carriers' obligations to publicly disclose prices and fees and treat businesses and their customers fairly." Further details were not provided, but neither OSRA 2021 nor OSRA 2022 appear to directly address antitrust immunity.

The White House also indicated that existing oversight efforts would continue, reported on progress with the FMC's audit program, new investigations, a new data initiative, and a pending FMC rulemaking on Demurrage and Detention billing currently open for public comment (through March 17, 2022).

Conclusion and Considerations

Coming on the eve of President Joe Biden's State of the Union address on March 1, it is anticipated that President Biden will highlight these and other efforts to address supply chain issues. Moving forward, expect continued activity on the legislative and regulatory fronts. Stakeholders with interests in the legislation and the current rulemaking still have opportunities for involvement.

Regarding the enhanced DOJ-FMC cooperation, the initiative points yet again in the direction of heightened scrutiny ahead, with the potential for more robust investigations, more enforcement capacity and harsher penalties. As Holland & Knight has advised previously, supply chain stakeholders should review their practices and antitrust compliance protocols, proceed cautiously and engage legal counsel before initiating discussions or entering into agreements with marketplace counterparties.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.